Public-Private Partnership for Increasing Access to Safe Drinking Water
Summary
Rapid population growth and urbanization are straining Kigali's infrastructure services, resulting in approximately one-quarter of residents not having access to piped water. In response to the service challenges, the Government of Rwanda signed a 27-year Public-Private Partnership with Metito to create the Kigali Bulk Water Supply project.
The project consists of a water treatment plant, a well field, pumping stations, reservoirs and pipelines, and, as of March 2021, supplies 40% of Kigali's water demand (or 40,000m 3 per day). It has strong political support and is intended to support the government's objective of securing universal access to clean water by 2024. While the project is promising, the project does not address aspects related to the water utility, including management, distribution or tariff setting, which will require further consideration going forward.
Rapid urbanization and population growth of between 4.1 to 5.8% by 2025 in Kigali are straining the city's infrastructure services, resulting in around 73% of residents having access to piped water (OECD, 2021; JICA, 2022). The limited public water production and supply capacity, hindered by a relatively high rate of non-revenue water (38%), frequently leads to water restrictions or supply stoppages for increasing numbers of water supply subscribers in the city (OECD, 2021; JICA, 2022). The anticipated demand for water has and will continue to outpace the ability of water infrastructure to provide a sufficient supply.
Intervention
In response to service challenges relating to water scarcity, the Government of Rwanda committed to increasing water supply and ensuring 100% coverage in Kigali by replacing old water networks and constructing new ones (MINIFRA, 2021). In March 2015, the Government signed a 27-year public-private partnership (PPP) concession agreement with Metito, which included a two year grace period for project development and construction, and 25 years of operation and maintenance (PPIAF, 2015; OECD, 2021). The project is expected to have three main objectives: 1) providing clean potable water to the population; 2) addressing the country's growing demand in the industry sector for reliable access to water; and 3) increasing economic growth due to improved productivity and redeployment of government savings from the health sector into other sectors (AfDB, 2020).
The Kigali Bulk Water Supply project is the country's first independent water producer project on a large-scale and involved the development, design, financing, construction and operation of a 40,000m 3 /day Bulk Water Facility (BWF) in Kanzenze, the southeastern part of Kigali, with groundwater extracted from the south bank of the Akagera River (Metito, 2021; MINIFRA, 2021). The project consists of a water treatment plant, a well field with 38 wells, three pumping stations, three storage reservoirs, and almost 600km of pipelines (AfDB, 2020). Under the PPP agreement, Kigali Water Limited (KWL) supplies bulk water to WASAC, which then sells the water to local consumers (AfDB, 2020).
The project has strong political support, demonstrated by the Ministry of Infrastructure underscored that the project is part of the larger objective of rehabilitating, upgrading and extending water networks in the city and peri-urban areas to increase access to clean water (MINIFRA, 2021). Overall, the project will assist in accelerating the government's plans towards achieving the target of universal access by 2024 (MINIFRA, 2021). In the run-up to the implementation of the PPP, the National Water Strategy, derived from the National Public Investment Policy, promoted the evaluation of options to mobilize private investment for bulk water production, treatment and the extension of distribution systems (PPIAF, 2015). The Infrastructure Development Collaboration Partnership Fund (DevCo) supported and advised the government in assessing the feasibility of the project and in determining the most suitable PPP structure in line with the government's development objectives (OECD, 2021).
The PPP is funded via a tiered capital structure, meaning that KWL will build, maintain and operate the treatment plant and sell bulk water of drinking quality to WASAC , which is in charge of its transmission and distribution (OECD, 2021). At the end of 27 (25+2) years, Metito will transfer KWL over to WASAC, which will maintain and operate KWL (OECD, 2021). The total cost of the program is expected to be USD 63M (MINIFRA, 2021). The Emerging Africa Infrastructure Fund (EAIF) is mandated to be the lead arranger of financing. EAIF provided USD 19M in senior debt and USD 2.6M in junior debt to KWL, with additional funding from the African Development Bank. Various funding have been provided to cover other aspects of the program, including technical assistance, from the Private Infrastructure Development Group, the World Bank and Metito. The discrepancy between the currency of the loans (USD) and the local currency (Rwandan Francs) may have implications for the overall cost and level of risk of the project (OECD, 2021). While the blended package was denominated in USD which would allow for cheaper debt than the local currency, foreign financing entails a higher level of currency risk (OECD, 2021). As revenue generated from WASAC will be in Rwandan Francs, a free floating currency, foreign investors can incur losses in the event of currency fluctuations (OECD, 2021). Some of the risk, however, was addressed by minimizing project costs and maximizing efficiencies with the decision to separate the distribution infrastructure from the plant under a distinct concessional loan (OECD, 2021).
Challenges
Unlike traditional brownfield water concessions, the Kigali project does not directly address issues with the ongoing management of WASAC, retail water distribution to end-users or tariff setting, though support for reforms in these areas during the PPP preparation process (PIDG, 2020). As such, over the lifetime of the concession and beyond, the Rwandan government will have to address these sector issues, if the additional bulk water provided by the project is to be used effectively (PIDG, 2020).
Outcomes
The Kigali Bulk Water Supply project is the first large-scale water treatment facility financed through a PPP model in sub-Saharan Africa, and one of the first water infrastructure projects established through a Build, Operate and Transfer arrangement (OECD, 2021). The project has been in operation since 2021. The treatment plant optimized its capacity from 5,000m 3 per day in February 2021 to 40,000m 3 per day in March 2021 (OECD, 2021). The supply of 40,000m 3 per day provides 40% of Kigali's potable water requirements (sufficient water for approximately 500,000 Rwandans) and assists in securing access to sufficient water to the city's growing population (PPIAF, 2015).
References
Public-Private Partnership for Increasing Access to Safe Drinking Water
Summary
Rapid population growth and urbanization are straining Kigali's infrastructure services, resulting in approximately one-quarter of residents not having access to piped water. In response to the service challenges, the Government of Rwanda signed a 27-year Public-Private Partnership with Metito to create the Kigali Bulk Water Supply project.
The project consists of a water treatment plant, a well field, pumping stations, reservoirs and pipelines, and, as of March 2021, supplies 40% of Kigali's water demand (or 40,000m 3 per day). It has strong political support and is intended to support the government's objective of securing universal access to clean water by 2024. While the project is promising, the project does not address aspects related to the water utility, including management, distribution or tariff setting, which will require further consideration going forward.
Rapid urbanization and population growth of between 4.1 to 5.8% by 2025 in Kigali are straining the city's infrastructure services, resulting in around 73% of residents having access to piped water (OECD, 2021; JICA, 2022). The limited public water production and supply capacity, hindered by a relatively high rate of non-revenue water (38%), frequently leads to water restrictions or supply stoppages for increasing numbers of water supply subscribers in the city (OECD, 2021; JICA, 2022). The anticipated demand for water has and will continue to outpace the ability of water infrastructure to provide a sufficient supply.
Issue
Intervention
In response to service challenges relating to water scarcity, the Government of Rwanda committed to increasing water supply and ensuring 100% coverage in Kigali by replacing old water networks and constructing new ones (MINIFRA, 2021). In March 2015, the Government signed a 27-year public-private partnership (PPP) concession agreement with Metito, which included a two year grace period for project development and construction, and 25 years of operation and maintenance (PPIAF, 2015; OECD, 2021). The project is expected to have three main objectives: 1) providing clean potable water to the population; 2) addressing the country's growing demand in the industry sector for reliable access to water; and 3) increasing economic growth due to improved productivity and redeployment of government savings from the health sector into other sectors (AfDB, 2020).
The Kigali Bulk Water Supply project is the country's first independent water producer project on a large-scale and involved the development, design, financing, construction and operation of a 40,000m 3 /day Bulk Water Facility (BWF) in Kanzenze, the southeastern part of Kigali, with groundwater extracted from the south bank of the Akagera River (Metito, 2021; MINIFRA, 2021). The project consists of a water treatment plant, a well field with 38 wells, three pumping stations, three storage reservoirs, and almost 600km of pipelines (AfDB, 2020). Under the PPP agreement, Kigali Water Limited (KWL) supplies bulk water to WASAC, which then sells the water to local consumers (AfDB, 2020).
The project has strong political support, demonstrated by the Ministry of Infrastructure underscored that the project is part of the larger objective of rehabilitating, upgrading and extending water networks in the city and peri-urban areas to increase access to clean water (MINIFRA, 2021). Overall, the project will assist in accelerating the government's plans towards achieving the target of universal access by 2024 (MINIFRA, 2021). In the run-up to the implementation of the PPP, the National Water Strategy, derived from the National Public Investment Policy, promoted the evaluation of options to mobilize private investment for bulk water production, treatment and the extension of distribution systems (PPIAF, 2015). The Infrastructure Development Collaboration Partnership Fund (DevCo) supported and advised the government in assessing the feasibility of the project and in determining the most suitable PPP structure in line with the government's development objectives (OECD, 2021).
The PPP is funded via a tiered capital structure, meaning that KWL will build, maintain and operate the treatment plant and sell bulk water of drinking quality to WASAC , which is in charge of its transmission and distribution (OECD, 2021). At the end of 27 (25+2) years, Metito will transfer KWL over to WASAC, which will maintain and operate KWL (OECD, 2021). The total cost of the program is expected to be USD 63M (MINIFRA, 2021). The Emerging Africa Infrastructure Fund (EAIF) is mandated to be the lead arranger of financing. EAIF provided USD 19M in senior debt and USD 2.6M in junior debt to KWL, with additional funding from the African Development Bank. Various funding have been provided to cover other aspects of the program, including technical assistance, from the Private Infrastructure Development Group, the World Bank and Metito. The discrepancy between the currency of the loans (USD) and the local currency (Rwandan Francs) may have implications for the overall cost and level of risk of the project (OECD, 2021). While the blended package was denominated in USD which would allow for cheaper debt than the local currency, foreign financing entails a higher level of currency risk (OECD, 2021). As revenue generated from WASAC will be in Rwandan Francs, a free floating currency, foreign investors can incur losses in the event of currency fluctuations (OECD, 2021). Some of the risk, however, was addressed by minimizing project costs and maximizing efficiencies with the decision to separate the distribution infrastructure from the plant under a distinct concessional loan (OECD, 2021).
Challenges
Unlike traditional brownfield water concessions, the Kigali project does not directly address issues with the ongoing management of WASAC, retail water distribution to end-users or tariff setting, though support for reforms in these areas during the PPP preparation process (PIDG, 2020). As such, over the lifetime of the concession and beyond, the Rwandan government will have to address these sector issues, if the additional bulk water provided by the project is to be used effectively (PIDG, 2020).
Outcomes
The Kigali Bulk Water Supply project is the first large-scale water treatment facility financed through a PPP model in sub-Saharan Africa, and one of the first water infrastructure projects established through a Build, Operate and Transfer arrangement (OECD, 2021). The project has been in operation since 2021. The treatment plant optimized its capacity from 5,000m 3 per day in February 2021 to 40,000m 3 per day in March 2021 (OECD, 2021). The supply of 40,000m 3 per day provides 40% of Kigali's potable water requirements (sufficient water for approximately 500,000 Rwandans) and assists in securing access to sufficient water to the city's growing population (PPIAF, 2015).
Issues |
|---|
Water Scarcity and Access |
Solutions |
|---|
Infrastructure & System Improvements |
References
The government of Rwanda and Metito announce the financial close of the first bulk surface water supply PPP project in Sub-Saharan Africa. Metito. (2021, August 3). Retrieved June 24, 2022, from https://www.metito.com/news-detail/the-government-of-rwanda-and-metito-announce-the-financial-close-of-the-first-bulk-surface-water-supply-ppp-project-in-sub-saharan-africa/
Kigali bulk water project to address water shortage issues in the city of Kigali and in Bugesera District, minister Gatete. Ministry of Infrastructure (MININFRA). (2021, February 24). Retrieved June 22, 2022, from https://www.mininfra.gov.rw/updates/news-details/kigali-bulk-water-project-to-address-water-shortage-issues-in-the-city-of-kigali-and-in-bugesera-district-minister-gatete#:~:text=The%20Kigali%20Bulk%20Water%20Supply,a%2025%2Dyear%20Concession%20Agreement.
Leighland, J. (2008). The Rise and Fall of Brownfield Concessions: But Some Signs of Recovery After a Decade of Decline. PPIAF. Retrieved June 24, 2022, from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.642.1751&rep=rep1&type=pdf
OECD. (2021). The Kigali Bulk Water Supply project: When a Public Private Partnership meets Blended Finance. OECD iLibrary. Retrieved June 20, 2022, from https://www.oecd-ilibrary.org///sites/ab9360c5-en/index.html?itemId=/content/component/ab9360c5-en#section-d1e7328
PPIAF Helps the Government of Rwanda Manage Private Sector Participation in the Water Sector. Public-Private Infrastructure Advisory Facility (PPIAF). (2015, April). Retrieved June 22, 2022, from https://library.pppknowledgelab.org/PPIAF/documents/3088/download
Rwanda - Kigali Bulk Water Supply Project. African Development Bank (AfDB). (2020). Retrieved June 22, 2022, from https://projectsportal.afdb.org/dataportal/VProject/show/P-RW-E00-008
Rwanda: Project for Strengthening Non-revenue Water Control in Kigali City Water Network. Japan International Cooperation Agency (JICA). (2022, February). Retrieved June 22, 2022, from https://www.jica.go.jp/oda/project/r7mcj000000e0z3a-att/project_breaf_note_202202_en.pdf
World Water Day. The Kigali Bulk Water Concession: Meeting the challenges of private investment in water infrastructure. Private Infrastructure Development Group (PIDG). (2020, March 24). Retrieved June 24, 2022, from https://www.pidg.org/2020/03/world-water-day-the-kigali-bulk-water-concession-meeting-the-challenges-of-private-investment-in-water-infrastructure/